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Nine Radio Groups Criticize iHeart and Salem on Ownership Stance

Coalition including Connoisseur and Townsquare say radio can’t compete without greater economies of scale

If the FCC wants to protect localism and diversity, it should allow more consolidation in local radio markets.

That’s the message from nine radio companies, who say broadcast radio can’t compete without greater economies of scale.

They also criticized iHeartMedia and Salem Media for their stances on the issue.

The joint comments were filed in the FCC’s latest quadrennial review process. The nine companies are Connoisseur Media, Townsquare Media, Mid-West Family Broadcasting, Midwest Communications, Frandsen Family Stations, Forever Media, Neuhoff Communications, Eagle Communications, Patrick Communications and Legend Communications. They are represented by David Oxenford of Wilkinson Barker Knauer.

In each of the largest Nielsen markets, a licensee currently can own up to eight radio stations, but a subcap limits a licensee to owning no more than five in either the AM or FM service in a given market. The NAB favors abolishing AM caps entirely and raising FM limits. iHeart proposes eliminating ownership limits on AM stations but retaining the current local restrictions on FMs.

The nine groups took issue with anti-deregulation arguments from familiar opponents like musicFirst.

But they also challenged iHeartMedia’s argument that the relevant product market in analyzing the ownership rule should be limited to the local radio market, calling iHeart’s thinking “underinclusive and short-sighted.” They said iHeart is ignoring that local radio competes with unregulated digital audio platforms for the same audiences and ad dollars.

They also believe iHeart overlooks that FM radio’s viability also has been affected by technological innovations, and that the use of both AM and FM radio in vehicles is declining. They cite data from Edison Research showing that “Americans are rapidly abandoning both AM and FM broadcast radio in their vehicles for digital streaming platforms.”

The nine companies further disagreed with Salem Media, which opposes relaxing FM radio subcaps for fear of destroying religious radio and disincentivizing AM investment.

“By focusing its concerns on FM deregulation,” they wrote, “Salem Media downplays the competitive threat posed by digital audio platforms to the viability of religious broadcasting in the AM band.” But external competitive forces, not “intramodal” ones, are the greatest threat to radio, they said.

“Salem Media and iHeart’s focus on the preservation of AM radio misses the point. The Quadrennial Review is not meant to fix the problems that are facing AM radio. … [A]ll radio services, not just AM, are suffering from the competition from Big Tech, and the rules must be changed to give radio operators the scale to compete.”

Permitting local radio market consolidation, the groups concluded, “would allow the radio industry to challenge the competitive advantages that Big Tech enjoys through vertical integration and greater capitalization.”

In response to other critics, the nine companies acknowledged that some believe relaxing the Local Radio Ownership Rule would make commercial radio worse — “by depleting localism, local intramodal competition, ownership diversity and viewpoint diversity,” and threatening jobs.

However, “For companies like the Joint Commenters, this statement could not be further from the truth.”

They say it’s clear that “radio broadcasters face unprecedented competition for audience and advertising,” and that it is “well-substantiated” that the current rules actually harm localism.

Permitting consolidation, they said, would provide broadcasters with the ability “to provide local stations with the means to truly serve the public” and “greater scale to compete with digital media companies.”

Critics who want to keep the restrictions “do not provide any new studies or data supporting their conclusion that over-the-air radio is somehow an island unto itself, and that only competition from other radio stations remains the proper market for the commission’s evaluation of competition and diversity.”

While broadcast radio remains an important part of the audio media landscape, they said, “Big Tech companies and other out-of-market digital platforms are eroding radio’s advertising base and audience share by offering broad and diverse audio products that are not subject to any regulation. Instead, broadcast radio’s survival depends on the ability of broadcasters to achieve scale in their local markets — which, in turn, will enable radio to provide a better product to compete with digital media.”

Read the comments (PDF).